“Be careful what you wish for,” cautioned Craig Moffett, Senior Analyst at MoffettNathanson on Tuesday’s court ruling. According to Moffett, AT&T finally got its prize with Judge Richard Leon’s unconditional approval of AT&T’s acquisition of Time Warner. Judge Leon made the unusual move of urging the Department of Justice not to seek a stay; barring any appeals, the deal will be consummated within the next few days.
“Time Warner will be a positive for AT&T’s income statement, at least initially,” Moffett said in a client report. “But it will be a negative for the balance sheet. The new AT&T will carry an astounding $249B of debt (inclusive of operating leases and postretirement obligations). If pro forma AT&T were a country, it would place 32nd on the list of highest total debt burdens, between Indonesia (at $335B) and the UAE ($220M). Pro forma leverage, on an adjusted basis, will now be 3.9x EBITDA,” he said. “And that leverage ratio will be supported by EBITDA that is shrinking – yes, shrinking – on an organic basis. And, yes, that’s true even with Time Warner included.”
June 14, 2018